2026 (2) TMI 1346 - AT - Customs

Burden of Proof: conflicting expert evidence can defeat extended limitation, penalties and confiscation, securing exemption entitlement.

The article examines a customs appeal where the central legal issue was burden of proof in alleged misclassification; it finds that conflicting expert ... Classification of imported goods - LCD/LED panels versus Open cells - eligibility for exemption under Notification No. 12/2012-Cus (S.No. 432) - extended period of limitation u/s 28(4) - penalty u/s 114A - confiscation and redemption fine in lieu of confiscation - burden of proof on the Revenue in show-cause proceedings - LCD Panels vs Open Cells - HELD THAT:- The imported goods were described in the Bills of Entry and also in all the import documents as LED Panels, semi-finished, LSC 400HM09-0 (parts of LED TV) as claimed by the appellant. The case of the Revenue is that they were not LCD/LED Panels but were open cells. This was the allegation in the SCN and the finding in the impugned order. The burden of proving that the goods which were described as LED panels, semi-finished in the documents were, in fact, Open Cells rests on the Revenue. The Commissioner concluded in the impugned order that the imported goods were ‘Open cells’ and not LCD Panels. We find that there is a clear difference of opinion between Shri Malhotra, Shri Thakur and Shri Agarwala, which, in short, is whether the diffusers, reflectors, films, cushions, frame and cover have to be added to the Open cell to make it an LCD Panel or merely adding a T-Con Board to the Open cell will make it an LCD Panel. There is no clear evidence either way. Shri Malhotra was in the business of same goods and would have known how they are known in the market. Shri Thakur is from Samsung India–the Indian subsidiary of Samsung, Korea which manufactured the goods and hence should be familiar with the goods. On the other hand, Shri Agarwal is an exert from IIT Delhi. The dispute could have been resolved if the experts were examined and cross-examined and if the appellant was also allowed to produce its own experts from Samsung display (who, the department could have cross-examined). Since it is a case where the department alleged in the SCN that the imported goods were not LCD Panels but Open Cells, the burden of proof rests on the department. It has not been discharged in this case. We, therefore, find that the department has not established its case that imported goods were NOT LCD Panels but were open cells. Classification of the goods and exemption notification - The case of the department that the imported goods deserve to be classified under CTI 9013 80 10 and were not eligible to the exemption under Sl. No. 432 of Notification No. 12/2012-Cus dated 17.03.2012 is based on the assertion that the imported goods were not LCD panels but were ‘Open cells’. Since the department failed to prove that they were LCD Panels, the exemption notification no. 12/2012-Cus dated 17.3.2012 (S.No. 432) cannot be denied. It is therefore, not necessary for us to examine the alternative classification claimed by the appellant. Extended period of limitation - We have found the case in favour of the appellant on merits. Even otherwise, in the light of conflicting expert opinions regarding the nature of the goods, it was perfectly possible for the appellant to have entertained a belief different from that of the department. This is not a case of collusion or wilful misstatement or suppression of facts to invoke extended period of limitation under section 28 of the Act. Confiscation and imposition of redemption fine and penalty u/s 114A - Since we have found the case in favour of the appellant on merits, the finding that the imported goods were liable to confiscation, imposition of redemption fine in lieu of confiscation and penalty under section 114A also deserves to be set aside. The impugned order is set aside both on merits and on limitation and the appeal is allowed with consequential relief to the appellant. Issues: (i) Whether the imported goods were LCD/LED panels as claimed by the appellant or open cells as held by the Commissioner; (ii) Whether the goods are classifiable under CTI 8529 90 90 and eligible for exemption under Sl. No. 432 of Notification No. 12/2012-Cus dated 17.03.2012 or whether they fall under CTI 9013 80 10 and are not eligible for exemption; (iii) Whether the extended period of limitation under section 28(4) of the Customs Act, 1962 was correctly invoked; (iv) Whether penalty under section 114A of the Customs Act, 1962 was correctly imposed; (v) Whether seized goods were correctly held liable to confiscation and a redemption fine of Rs. 50,00,000/- was correctly imposed.Issue (i): Whether the imported goods were LCD/LED panels or open cells.Analysis: The record contains conflicting expert opinions and contemporaneous statements: departmental witnesses and a Samsung official who examined samples described the goods as open cells, while the appellant relied on an IIT expert opinion asserting the goods were LCD/LED panels. The tribunal examined the provenance of opinions, opportunities for cross-examination, and whether the department discharged its burden to prove the goods were open cells. The tribunal found material conflict in expert evidence and noted the department failed to conclusively establish the goods were not LCD panels.Conclusion: The tribunal concluded that the department has not proved that the imported goods were open cells; the finding that they were not LCD/LED panels is set aside in favour of the appellant.Issue (ii): Whether the goods are classifiable under CTI 8529 90 90 and eligible for exemption under Sl. No. 432 of Notification No. 12/2012-Cus dated 17.03.2012 or classifiable under CTI 9013 80 10.Analysis: The department's challenge to classification and denial of exemption was premised on the goods being open cells. Having found that the department did not prove that factual premise, the tribunal did not need to decide alternate classification; entitlement to the exemption follows from the accepted characterization of the goods as LCD/LED panels in the record.Conclusion: The tribunal held that the exemption under Sl. No. 432 of Notification No. 12/2012-Cus dated 17.03.2012 cannot be denied; the goods are not to be reclassified under CTI 9013 80 10 for the purposes of denying the exemption.Issue (iii): Whether the extended period of limitation under section 28(4) of the Customs Act, 1962 was correctly invoked.Analysis: Invocation of the extended period requires proof of collusion, wilful misstatement or suppression. Given the conflicting expert evidence and the plausible basis for a differing view on classification, the tribunal found a bona fide or arguable difference in position existed and that extended limitation was not properly attracted.Conclusion: The tribunal held that the extended period under section 28(4) was not correctly invoked.Issue (iv): Whether penalty under section 114A of the Customs Act, 1962 was correctly imposed.Analysis: Penalty under section 114A arises from prohibited acts such as misdeclaration; its imposition depends on the foundational findings of misdeclaration and invocation of extended limitation. Having negatived those findings, the basis for penalty falls away.Conclusion: The tribunal held that the penalty under section 114A was not correctly imposed and is set aside.Issue (v): Whether seized goods were liable to confiscation and the redemption fine of Rs. 50,00,000/- was correctly imposed.Analysis: Confiscation and redemption fine rest on the same factual determination that the goods were not entitled to exemption. The tribunal's favourable finding on the nature of the goods and on limitation removes the basis for confiscation and the imposed redemption fine.Conclusion: The tribunal set aside the order of confiscation and the redemption fine of Rs. 50,00,000/-. The appellant is entitled to consequential relief.Final Conclusion: The appeal is allowed; the impugned order dated 30.08.2019 is set aside on merits and on limitation, with consequential relief to the appellant.Ratio Decidendi: Where the department alleges misclassification, the burden to prove the goods are not as declared rests on the revenue; conflicting expert evidence and lack of conclusive proof defeats invocation of extended limitation, confiscation, redemption fine and penalty.